GCM Resources: Run up to golden cross

With GCM Resources’ technicals looking so appealing right now it’s a case of having to dial down enthusiasm levels.

On the fundamental front the latest positive news for GCM Resources is related to a recently signed consultancy agreement for the proposed development of a 2,000 megawatt power plant in Bangladesh. Indeed, the deal was said to concern GCM Resources’ joint venture with China Gezhouba Group to develop coal-fired power plants at the Phulbari coal and power project site. Of course, if you are a technical analyst such details are merely a side show to the real action here: the price action.

What can be seen on the daily chart in recent weeks is the way the shares have flipped back above the rising 50 day and 200 day moving averages, shown in blue and black respectively. In fact, we are in the run up to a Golden Cross between these two features, with the message being the strongest period in the technical cycle tends to be in the run up to such events. On this basis, one would call up GCM Resources shares towards the top of a rising trend channel from April last year heading as high as 80p. The timeframe on such a move is regarded as being the next 2-3 months. Only back below the 200 day line now at 26p really questions the ultra bullish scenario.